Did you receive a summons for a debt lawsuit in the mail? It can be a frightening and stressful experience to get sued for a debt you owe in Alabama, especially if you have a difficult time repaying the debt before your court date. If the lawsuit is filed against you, you may wonder where you will get the money or whether or not you will be able to fight it in court.
There are few things more painful than losing a court case. If you lose, the court will grant your creditor a judgment, which allows them to step up their collections efforts against you. They will be able to freeze your bank account, garnish your wages, and even seize your property in some cases.
In Alabama, you can settle your debt with the creditor or the debt collector if you can’t afford to repay it before the court date.
Let’s dive right in and get started.
3 Steps To Settle Debt In Alabama
In order to settle a debt with an Alabama debt collector, you need to follow the three steps below.
- Answer the debt lawsuit.
- Start negotiating with a settlement offer.
- You’ll need an agreement to settle your debt.
1. File An Answer To The Debt Lawsuit
A creditor will start the process by filing a Complaint whenever they decide to sue a debtor. The Creditor will send you a copy of the Complaint and a Summons to appear before the court. In a Complaint, your creditor lists all the grievances he or she has against you, including how much you owe, interest, and fees. In the Summons, your court date and location will be provided.
If you receive a court summons, there are a lot of people who will fail to act. They will ignore the lawsuit, usually because they don’t know how to respond. This is a big mistake.
As part of your defense, you’ll most likely want to respond to the lawsuit with a written Answer, even if you plan to settle the debt well before your court date. If you don’t file an Answer in time, the court will likely order a default judgment against you automatically and you’ll lose the case automatically.
It is the law in Alabama that you have 30 days to respond to a lawsuit filed by a debt collector.
It is still possible that you could lose the case even if you reach out to the creditor or debt collector that is suing you to settle the debt and come to an agreement.
There is no way for the courts to know about your settlement or dispute over the debt unless you tell them about it. So, you will need to answer your lawsuit before you take any other action. It will give you time to negotiate a debt settlement offer without having to worry about losing.
2. Start Negotiations By Making An Offer
The next step for you to take is to decide how much you can afford to pay your creditor in a settlement. Check out your savings, and determine how much money you can stash away before your court date so you can pay the creditor.
If you need financial assistance to settle the debt, you may be able to sell something you no longer need, take on a part-time job, or ask friends and family for help.
A successful debt settlement is when consumers offer around 60 percent of their debt obligation in exchange for a settlement. For instance, if you owe $5,000, you’ll need to save $3,000 in order to offer a settlement.
In the event that the number is not within reach, offer what you can. Some creditors and collectors will be more lenient if they understand your situation and if you are willing to work with them toward a resolution.
The creditor will likely ask you to negotiate several times before you come to an agreement with which you feel comfortable; that’s okay, just remain determined until you reach one that works for both of you.
3. Make Sure Your Debt Settlement Agreement Is In Writing
In order to avoid being mistaken, make sure that you get a written copy of the terms of your debt settlement agreement before you pay a dime. It is important that the contract clearly states that your payment constitutes settlement for the entire amount of the debt and that you are waiving all rights to collect the remainder of the debt.
The instructions should also explain how the money can be transferred to the debtor, such as how to send a check to a P.O. Box or make an online payment to the debtor.
As a general rule, it is the creditors and debt collectors who will be responsible for drafting and submitting a debt settlement agreement to the case. Be sure to carefully read the agreement before signing it.
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In order to get the settlement agreement into effect, it must be signed by a notary, adding an additional layer of protection. A witness will be present on both sides of the contract when you sign it, which gives you additional credibility in the event that the debt collector tries to pursue collection activity against you again in the future.
As soon as you have signed a contract, follow the terms stated in it. Pay your creditor on time and with the correct amount. They should provide you with a receipt, and you should keep a record of every payment you make.
It is important to note that all states have unique requirements when it comes to the legalities of debt settlement agreements, so it is important to keep that in mind.
Having said that, let’s take a look at an example of someone who settled their debt in Alabama as part of the process.
An example of this would be Jeff being sued by a debt collection agency for $5,000. Upon responding to the lawsuit, Jeff buys himself some time in which to come up with a debt settlement plan. After taking a close look at his finances, Jeff determines he can afford to pay off 75% ($3,750) of the debt as soon as possible.
As a first step, he decides to offer to pay 50% of the debt ($2,500), which is a lot lower than the original settlement amount. A few rounds of negotiations later, the debt collection agency agrees to settle the debt for 70% of the original debt value, which comes out to 3,500. Jeff saves a lot of money and no longer has to worry about dealing with these collectors.
Are There Debt Collection And Debt Settlement Laws In Alabama?
Currently, Alabama does not have any additional protections beyond those provided in the FTC’s Fair Debt Collection Practices Act (FDCPA). However, all creditors and debt collectors are required to comply with the act’s rules in their collection activities. Some of the protections provided by the FDCPA are as follows:
- There should be no calls made to consumers before 8 a.m. or after 9 a.m., or at odd hours of the day.
- Consumers can’t be called all day long by creditors.
- A single debt shouldn’t get more than seven calls a week.
- Consumers can ask creditors not to call them at work.
- A creditor can’t pretend to be someone they aren’t.
As a result of both the FDCPA and Alabama’s statute of limitations, creditors and debt collectors may only pursue collection work against consumers who have not passed their statute of limitations.
Creditors can sue consumers for up to three years under AL Code 6-2-37 (2019), but debts involving contracts, not under seal will get six years under AL Code 6-2-34 (2021).
Creditors can sue consumers for contracts under seal for up to 10 years, according to AL Code § 6-2-33 (2019).
In Alabama, once a consumer’s debt passes the statute of limitations, creditors may still report the consumer’s account to credit reporting agencies. They can still call and send letters. However, if the consumer attempts to file a lawsuit against the company, the consumer can ask the judge to dismiss the lawsuit because the statute of limitations has expired.
It should also be mentioned that the Federal Trade Commission has recently amended the Telemarketing Sales Rule to broaden its coverage of it to include all debt relief companies and organizations. All 50 states, including Alabama, are governed by this rule in terms of its application to debt settlement companies.
The new Rule prohibits any company that provides debt relief services, such as debt settlement companies, from doing the following:
- Charge upfront fees. There is no way a debt settlement company can collect any fees from a consumer until after the debt has been successfully settled or resolved in some other way.
- Fail to disclose certain information about its services before a consumer enrolls in the program. An example of this would be to tell the customer how much the service costs, how long it will take for them to see results, how much money they need to save before they will be offered a settlement, what may happen if they fail to make the payments on time, their rights, and other important information.
- Misrepresent their services. There can never be any false or unsubstantiated claims regarding the services provided by a debt settlement company.
These Are Some Of The Best Debt Settlement Companies
It is up to you to decide.
The following are some debt settlement companies with fair reputations that you may want to consider:
- Freedom Debt Relief
- National Debt Relief
- Accredited Debt Relief
- Citizens Debt Relief
Start The Debt Settlement Process Today By Contacting Your Creditor
If you are ready to start the settlement negotiation process with your creditor, you have a number of options to choose from. You can call them, email them, or write them a letter if you prefer.
In the event you are faced with a time constraint, then it is recommended that you email your creditor or call them to discuss your situation. An email is quick, and you will have a written record of the conversation.
However, if you’d prefer to call the debt collector, you can also do that, too. As a bonus, it is recommended that you record your conversation in case the debt collector later reneges on the agreement. It is important to note that in Alabama, a telephone conversation can be recorded only with consent from one party, according to AL Code § 13A-11-30.
Here are some answers to some of the most common questions you may have if you’re considering debt settlement in Alabama.
In Order To Settle A Debt, What Percent Should I Offer?
There is a report that states that if a consumer works with a debt settlement company they can be able to settle their debts by 50% on average, according to America Fair Credit Council’s Regan Report.
In a debt settlement offer, it is recommended to start with 60% of the total value of your debt. If the creditor disagrees, they will provide you with a counteroffer. Explain your financial situation to the debt collector if you are unable to afford the counteroffer. If you can’t pay, the debt collector may be willing to work with you.
At the end of the day, you have to calculate how much you can afford to pay off. If a 60% offer is not feasible, you could offer less and explain your financial situation to the creditor or debt collector. They may be willing to work with you.
Is It Possible For Me To Settle My Debt On My Own In Alabama?
You can definitely handle the debt settlement process independently if you study how it works first. Then, you can start negotiating your first debt with your chosen creditor after learning how it works.
Who Qualifies For Debt Settlement?
If you can’t pay your bills, you can attempt to negotiate a debt settlement with your creditors. However, if you want to qualify for a particular debt settlement program with a debt settlement company, you might need to carry a certain amount of debt first. In most cases, if you wish to apply for a program, you will need to have at least $7,500 in unsecured debt.
It Is Possible To Settle Your Debt With A Little Effort
In Alabama, you can reach a resolution with your creditor before your court date by engaging with them and trying to work out a settlement. If you are willing to communicate with your debt collector, they are likely to be open to a settlement. You only have 30 days to respond to a debt collection lawsuit. Get started and consult resources if you have any further questions.